European Commission market tests commitments offered by Penguin to close probe on e-books

On 19 April 2013 the Commission issued a press release stating that it is market testing the commitments offered by Penguin, an international publisher, in relation to the sale of e-books in the European Economic Area (“EEA”).  The commitments are substantially the same as those offered by other international publishers last December 2012 (see Newsletter 6/2012 p. 12 , Newsletter 1/2012 p. 5 and Newsletter 4-5/2012 p. 10 for more background).

It may be recalled that the Commission was concerned that the joint switch from a typical wholesale model to an agency model may have been the result of collusion between competing publishers helped by Apple, and may have been aimed at raising retail prices of e-books in the EEA or preventing the emergence of lower prices, in breach of Article 101 of the Treaty on the Functioning of the European Union (“TFEU”).

In essence, Penguin will terminate the agency agreements that include price restrictions and “most-favored customer” clauses, and will not enter into such agreements for the next five years. Retailers will be entitled to offer discounts during a two-year “cooling-off” period, provided the aggregate value of price discounts granted by retailers did not exceed the total annual amount of the commissions that the retailer received from the publisher over a one year period.

Under the agency model, if any retailer sold an e-book at prices lower than that on Apple’s iBookstore, Penguin (like the other publishers involved) would have to match that lower price on Apple’s store, thus making it very costly for the publisher (in terms of lower revenues) to allow other retailers to sell at lower prices than Apple. [Gabriele Accardo]

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